For many, the words 'personal budget' immediately sends shivers down the spine. Why in the world would anyone need or want to budget their money?
First off, budgeting your money does NOT mean you are poor, or are in need of financial assistance. You'd be surprised to know how many considered to be "middle class", regularly budget their money in order to make the most of what they shave.
Secondly, designing and implementing a budget does NOT take a Harvard doctorate degree requiring hours upon hours of tedious work.
What is a Personal Budget?
Simply put, a budget helps you to track your income and keep your spending habits in check over a certain period of time, allowing you to reach specific goals.
Why Start A Budget
There are many reasons why a family may want to implement a budget. These "reasons" can be labeled PERSONAL BUDGET GOALS. The reason(s) you are budgeting your money.
It is imperative that you actually determine what your GOALS are before actually designing a budget plan. This is what you will be striving for.
Answer the question - 'Why do I want to start budgeting my money?' To save for a new house or car? Saving for your childrens' college education? What about an early retirement?
These are all very important goals that many of us will have to face at some point in our lives. And these are some of the goals that can be tackled through the implementation of a budget.
Summary - Set Your Goal(s)
Cash Flow Analysis
It is now time to determine the amount of "cash" that comes into your pocket every month, and the amount that leaves your pocket every month.
This is one of the most important steps in planning your budget, for it allows you to get a whole perspective of your current financial situation. At the same time, analyzing your "cash-flow" allows you to actually see where your incomes are coming from and how it is being spent.
Remember, this does not have to be done professionally nor does it need to be time consuming. In addition to that, try not to track every single penny that you spend. You'll drive yourself crazy. A budget should not frustrate you to death.
Start with your income(s). It's best to take it a month at a time so you get a clear, concise view of what you make on a monthly basis. Don't forget to include any benefit or interest payments you receive.
After you have an idea of the TOTAL amount you receive monthly, it's time to add up the expenses you pay every month. Generally, you can group most expenditures into two categories - fixed and variable.
Fixed bills - mortgage, car, insurance loans, etc...
Variable bills - utilities, phone, car maintenance, entertainment, food, etc...
It is really important that you tally up EVERYTHING that is paid out monthly. That includes all taxes, social security, 401(k) (retirement funds), and any other deductions that you might have taken directly out of your paycheck.
It works best if you write down ALL the expenses/bills that you pay monthly.
If you are having difficulty remembering what is paid every month, take a look back through your financial records, checkbook or bank statements for more accurate numbers.
Remember, you do not want to spend hours and hours, sweating over this. Budgeting should not be like another 9-5 job. The quicker and easier this analysis process is, the more you will be willing to go through with it.
Summary - Write Down ALL Incomes and Expenditures
Review Your List
Now that you have your list of incomes and expenditures, it is time to review what you have written. Look and see what bills/expenses can possibly be lowered. Do you notice any excessive spending areas? Any bills you know for sure that can be lowered?
This is where you might have to make some sacrifices. Is your dream of a brand new BMW worth giving up your restaurant outings three times a week? These are the choices you are faced with when you must decide how you are going to reach your goal(s).
Start out small. There's no need to become a first-rate miser overnight. That's hard to do! Take things a step at a time. Implement one money saving strategy a week, or month. Remember though, you decide at how quickly you accomplish your goals.
Summary - Review And Decide Where To "Cut-Back"
Track You Spending
In the real world, you are faced with thousands of advertisements and gimmicks begging you to 'buy their product'.
Buy what you must, just keep in mind your personal budget.
In order for accurate records, track as much of your spending as possible. Simply save all the receipts you get from your purchases. This is important because you need to tally everything to see how much money you saved at the end of the month.
Summary - Keep Track Of The Money You Spend
Compare Results & Modify
Now it's time to find out if all your hard work has paid off. Were you able to lower some bills? Finding out how much you saved is the best part of budgeting. It's exciting! This is what makes the whole budgeting process worthwhile.
Stick with your budget! Modify your spending habits to try and lower bills bit, by bit. You'll soon forget about the whole budget idea, and just see it as a game, where you try and save as much money as possible month by month.
You can find quite a number of money saving articles to help lower your bills at: www.SavingSecrets.com
Summary - Compare and Make Necessary Changes For Increased Results
Conclusion
The hardest part of the whole personal budget process is starting one. Once you set your mind to implement a budget, and take the time to formulate a written agenda, the rest falls into place.
Personal budgeting requires some small sacrifices. Changes in lifestyle. Changes in spending habits. Be creative and have fun saving money off your bills. You are doing this for YOU, to accomplish your GOALS, so stick with your budget plan and your will be rewarded!
Summary - Start YOUR Budget and Accomplish Your Goals!
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